Uncertainty about government intervention helps stifle investment that creates jobs

RALEIGH -- North Carolina's latest rise in unemployment numbers signals businesses' fears about the future. Uncertainty about the level of government intervention into the economy is holding back the entrepreneurs who create new jobs, according to a John Locke Foundation budget analyst.

Click here to view and here to listen to Joseph Coletti discussing the impact of the latest N.C. unemployment data.

A new report from the N.C. Employment Security Commission lists the state's unemployment rate at 9.7 percent for January, up a full 1.6 percentage points from the adjusted December rate of 8.1 percent. North Carolina's unemployment rate has reached its highest level since March 1983, when it topped 10 percent.

"While it's too soon to tie these numbers directly to policies put in place by the new Obama or Perdue administrations, we should remember that businesses base their hiring decisions on future expectations," said Joseph Coletti, JLF Fiscal Policy Analyst. "By January, North Carolina business owners clearly knew who would be steering the federal and state governments in the new year. The entrepreneurs who create new jobs didn't like what they saw."

At the federal level, the Obama administration has not signaled a willingness to choose one economic policy and stick with it, Coletti said. "Entrepreneurs would prefer government policies that get out of their way and let them do their jobs," he said. "But even a bad economic policy won't stop entrepreneurs, as long as they know what the policy is and know that government won't change the rules after they've started to make the investments that are critical to economic growth."

"Unfortunately, the new administration is following the same path that we saw late in the Bush administration -- constantly changing the rules of the game through bailout and stimulus proposals that ignore the real problems plaguing the economy," he added. "These muddled policies create uncertainty among the entrepreneurial class. Many of them are biding their time until they get a sense of the type of investments they'll be able to make without government interference."

Seasonally adjusted employment decreased by more than 98,000 workers to 4.1 million, according to the ESC. Unemployment increased by more than 73,000 workers, with more than 443,000 workers now listed as unemployed. The number of workers who were unemployed, but actively seeking work, remains at an all-time high.

Unemployment has increased by more than 215,000 people in the past year. The unemployment rate has nearly doubled in the past year. The state rate in January 2008 was 5 percent.

Big-government advocates will use these numbers to push policies that would make North Carolina's existing economic problems worse, Coletti said. "A person who sees the government as the solution to any problem will look at these unemployment numbers and say, 'Here's another reason for the government to spend more taxpayer money, take charge of the crisis -- do something,'" he said. "That's the exact opposite response to the one we need now."

"Government needs to take the steps that will make it more likely for entrepreneurs to make decisions and investments that create jobs," Coletti added. "That means cutting tax rates across the board when possible, or at least holding the line on existing taxes. It means avoiding choosing economic winners and losers through targeted tax breaks, mistakenly called economic incentives. It also means ending the government meddling that makes employers think twice about taking on the expense of hiring new workers."